Home MTA Economics For Walder, labor costs an 800-pound gorilla in the room

For Walder, labor costs an 800-pound gorilla in the room

by Benjamin Kabak

When MTA CEO and Chairman Jay Walder pledged last Friday to reform the way the MTA does business, he stressed the redundancies inherent in the way the transit organization is set up. There are, he said, 92 different public phone numbers and five call centers fielding complaints from the public. Over 5000 workers perform administrative tasks, and many of those jobs overlap. “There will,” he said, “be layoffs.”

Since his speech on Friday, Walder has received qualified phrase from those watching. The Daily News urged every government official to strike a similar tone, and transit activists were equally enthusiastic about Walder’s priorities. “The speech,” Gene Russianoff of the Straphangers Campaign said, “was a candid assessment of the financial challenges the MTA faces and of the agency’s commitment to tackling them, such as lowering hundred of millions in administrative, inventory and overtime costs.”

At the time, Walder skirted around the issue of the MTA’s labor relations. “Our unions must be active partners,” he said but refrained from going into detail. After all, at a time when the MTA could least afford it, its largest union had just been awarded a three-year raise, and the agency’s decision to appeal the arbitration result had left many at the TWU bitter toward the authority.

Yet, some would prefer to see Walder, with proper political support, tackle the union and the MTA’s labor cost problem head on. Nicole Gelinas, who has made exploding pension costs her fight, is one of those people, and in yesterday’s Post, she offered up her take on the MTA’s cost problem:

Here are some specifics. The MTA spends $6.4 billion a year on current-worker wages and benefits. A unionized city transit worker earns nearly $94,000 a year, including more than $26,000 in benefits. The unionized commuter-rail worker earns even more — well above $120,000.

Nor is it just union jobs. The average white-collar worker at NYC Transit and Metro-North earns well above $120,000, too. And LIRR administrators beat them by a mile, topping $142,000 each. (Patronage, anyone?)
MTA labor relations aren’t white-collar vs. blue-collar — but everyone against the taxpayers.

The savings Walder laid out are worthy. But cutting, say, 10 percent from administrative personnel would yield just $90 million — a rounding error in the authority’s $12 billion budget. Saving 10 percent in union labor costs, on the other hand (including pensions over time), would yield a much heftier $546 million, because the union workforce is much bigger.

The MTA has long tried doing this in the cooperative “let’s work with our labor partners” way for years — and we’re still waiting for results. What riders need is for Walder to call for full support — from Paterson and the Legislature — for a full labor overhaul. Workers must pay more for health care, and future workers must pay more for pensions, saving hundreds of millions. (Instead, the new contract for subway and bus workers has them paying less toward retirement.)

Gelinas’ basic point is a sound one. From top to bottom, from management to track workers, from blue collar to white, the MTA’s compensation scales are crippling the organization. It’s bureaucratic flow chart makes no sense, and its willingness to give away perks have driven up labor costs in every sense. Cutting from MTAHQ will save some money, but the rising tide of pensions and health care costs will sink all ships.

So what is to be done? In this pro-labor city, it’s tough to tackle the unions. They enjoy public and political support, and workers’ rights shouldn’t be eroded as is. But as some point, the MTA will be unable to pay, and everyone — the riding public, the train workers, the desk jockeys — will lose.

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Alon Levy January 20, 2010 - 12:47 am

Remember that all of the countries that Walder’s report point to as having lower costs than New York have heavily unionized public sectors, and high social security and pension costs. Italian and French unions have both been known to paralyze work with public transportation strikes. The difference between New York and its European peer cities is that it requires more workers for a combination of incompetence, contractor bloat, and specific union rules mandating a certain number of workers. Those issues need to be fought. Pensions aren’t a big deal.

David January 20, 2010 - 12:50 am

Gelinas’ arguments in the Post are the same made by oh so many about every city and state agency, be it fire, police, teaching, etc. It’s somewhat disingenuous to say that the workers “earn” on average $94,000 a year, considering that so many of these workers work in more high-risk jobs than you, me or Ms. Gelinas and richly deserve the health benefits and pensions they receive. City workers, and the rights they’ve earned through collective bargaining over decades, mostly represent the proper standard of healthcare and pensions that all workers should get, not some overpriced boondoggle.

And, not to sound like some union shill (which I fear I might), the MTA’s struggles are not directly because of high labor costs – it’s just that lean times makes healthy pensions and good benefits an easy target for editorial writers and good-government groups.

Something like Tier V pension reform, which has already been enacted at the state level and at the city level with teachers, is definitely a good idea and will be implemented within the year, I think; it’s relatively fair pension reform, considering. Something like agency-wide pay reductions, or having workers pay high amounts into their healthcare, is just antagonistic.

Benjamin Kabak January 20, 2010 - 12:51 am

That’s a sound argument and a valid choice. But the trade-off is simply less money for service. If that’s how we as a city want our transit agency to be run, then we’ll just have to live with it.

The money that flows to the MTA is not infinite, and when the flow slows to a trickle, we have to make tough choices about how that money is spent. That’s just a fact of transit politics in New York. No one is wrong to choose labor over service, and no one is wrong to choose service over labor. We all should be aware of the choice though and work to convince politicians to find more money for both so we don’t have to make that choice.

Alon Levy January 20, 2010 - 5:36 am

The tradeoff isn’t less money for service – it’s less money for 5,000 administrators staffing 92 phone numbers.

Benjamin Kabak January 20, 2010 - 8:06 am

The 5000 administrators aren’t staffing the 92 phone numbers. From what I’ve been told, the 92 phone numbers are staff by a little less than 400 people. That’s the PR staff everyone keeps talking about. The 5000 administrators work at the various agencies. Even if those are cut to a minimum, as Gelinas writes, the cost savings pale in comparison to the amount spent on the rest of the workforce.

Alon Levy January 20, 2010 - 10:01 pm

The cost savings pale only if you really think 10% is all that’s achievable.

Conversely, consider the difference between American cities and anywhere else in the developed world that’s not Hong Kong or Singapore. The US actually has fewer benefits than most countries. What unions get in the US is a lot by US standards, but not by the standards of Continental Europe and parts of East Asia.

The difference in costs come from how many people are employed and how efficiently they’re used, not from how much they’re compensated. For example, proof of payment means one operator per mainline train instead of six; OPTO means one operator per subway train instead of two; frequent off-peak service means more regular shifts and less overtime, reducing labor costs per train.

Alec January 20, 2010 - 1:09 am

I don’t buy the argument. Instead pushing for Albany to attack the wages of what are obviously middle-class salaried employees in the NY metro area, why wouldn’t we simply push for higher taxes on upper-income brackets to pay for this directly? Unions exist for a reason: to fight these kinds of arguments head-on. They exist to move the socio-economic conditions which burden the public-utility/public-works sphere with insufficient funding on to the shoulders of those who deserve to bear it: the wealthy.

nathan_h January 20, 2010 - 12:09 pm

If unions exist to promote progressive income taxes, they’ve got a lot of explaining to do.

Alon Levy January 21, 2010 - 3:11 pm

Unions in principle believe in progressive income taxes, but in practice don’t fight for them. Basically, you have the existing public sector and manufacturing unions, which fight for survival and wage increases, and the growing service unions, which are trying to organize in anti-union shops like Wal-Mart and support general progressive legislation relevant to their members (like universal health care, or immigration reform for unions in immigrant-heavy industries).

Ray January 20, 2010 - 8:13 am

I have empathy for any employee – its hard to pay someone less to do the same job. And thus it won’t happen. Yet, let’s get real. Somehow we find ourselves compensating a member of the blue collar commuter rail workforce $120,000 per year. Considering that the average commercial pilot earns about $150,000, even with benefits – a package worth $120K is excellent (it’s certainly better than middle class).

I can’t figure it out. While I realize many of these jobs are graded well – requiring skill and responsibility (guiding a few thousand commuters to work for instance), are there not a large number of lower grade positions that should weigh down the average? Any insight?

While $142,000 is a very good comp package for a manager, I’d express a concern with the gap of only $22K between average workforce and management. It’s not “a mile” by any experience of mine. A reasonable assumption is that management jobs often grade substantially higher given the professional skill and responsibility/accountability of roles.

I’d say the unions have been well represented. Management, riders and taxpayers have been very generous. Its not unreasonable given these wages to for MTA stakeholders to expect that any plans for eliminations of obvious redundancy, roll outs of new technology, and workforce scheduling efficiency initiatives are met vigorously.

Working Class January 20, 2010 - 8:21 am

If you live in NY and make less than 200K a year you are middle class.

That hack Gelinas doesn’t give the savings that can be acheived by laying off thousands of MANAGERS throughout the agencies all of which make a minimum of 120k a year not including benefits and pension costs!

Benjamin Kabak January 20, 2010 - 9:13 am

Did you read Gelinas’ piece? She certainly does say what savings can be achieved by laying off some of those 5000 administrators who work at the MTA. As she wrote in the part I excerpted, “cutting, say, 10 percent from administrative personnel would yield just $90 million.” How many white collar jobs do you realistically think the MTA could cut and still run an organization as big and as vast as the area’s transit network is? Even if they cut 20 percent, that’s still $180 million as opposed to 20 percent in union labor costs which would save over $1 billion.

The fact is that in a bad economy, everyone has to pay. That’s how it is in every other workforce situation around the nation right now, and it sucks for all us. But unless the state’s willing to pony up some more money for the MTA, workers — white collar, blue collar and every other color collar in between — are going to feel the pain. Or, as I said above, the rest of us can through service cuts. It just depends upon how you conceptualize the MTA’s duties to the public.

Alon Levy January 20, 2010 - 3:06 pm

The problem with Gelinas is that like everyone else who has no expertise in how transportation works, she makes up numbers. The transit administration isn’t bloated by a factor of 10%; more likely, it’s a factor of 2 or higher.

When everyone pays in a bad economy, you get deflation. In fact, Sweden got out of the Depression first by raising wages… but that would require the Manhattan Institute people to actually know something about economic history.

AK January 20, 2010 - 9:13 am

“If you live in NY and make less than 200K a year you are middle class.”

This is just completely false. Here is Census data from 2000 from NEW YORK COUNTY (the richest county in the City):


As you can see, only 24% of households make over 100K, let alone 200K. 2/3 make less than $75,000. The median household income was $47,030.

Of course, maybe we’re arguing semantics (re: the definition of “middle class”), but see here for a discussion of that issue:


Let me say that I am earn $35,000 as a lawyer (single, which makes a big difference), live in Manhattan, and certainly believe I am a member of the middle class. I think I would characterize my class differently if I made 6 times as much money.

Alon Levy January 20, 2010 - 3:06 pm

The median income in the richest Upper East Side census tract is $180,000, I believe.

AK January 20, 2010 - 3:49 pm

Yes, and the Upper East Side is full of upper class people, not middle class people.

nycpat January 20, 2010 - 6:49 pm

There are 200,000+ people on the upper east side. Those walk ups between York and Third are full of middle class people with room mates, rent stabilized/controlled ,etc. There are still SROs on Third.

AK January 20, 2010 - 8:26 pm

Yes, thats true nycpat, but those in rent stabilized apartments on york aren’t making 100K. That’s my point. $180,000/year is UPPER class, not middle class.

Alon Levy January 20, 2010 - 9:54 pm

The census tracts east of Third have median household incomes in the high 5 figures. Mine (I live at 72nd and York) is at $67,000. The six-figure medians are all in the tracts abutting Park or Fifth.

(I’m not sure why you think I said that $200,000 is middle class. It’s not, not even in Manhattan – I’d put the middle/upper-middle boundary at a little over $100,000 for Manhattan living costs. Outside Manhattan, even $75,000 could be called upper middle class.)

nycpat January 20, 2010 - 11:05 pm

I was assuming that you were inferring that everyone on the Upper Eastside is upper middle class or wealthy. Rereading your post I see my error. I know a dozen NYCT workers who live there.

AK January 21, 2010 - 9:44 am

Alon, you’ve gotta read what I’m responding to in the first instance, which was Working Class’s comment: “If you live in NY and make less than 200K a year you are middle class.”

Alon Levy January 21, 2010 - 3:12 pm

I read it… basically, I was giving an argument in support of you and in disagreement with Working Class. I just read your “Yes, and…” comment as thinking I believe people who live on Fifth Avenue are middle class.

Justin Samuels January 21, 2010 - 9:29 pm

$35,000 is POOR in Manhattan. On $35,000 a year, you cannot have an one bedroom apartment in most desirable areas of Manhattan.

Rich or upper class people make millions or billions. CEOs, other executives, A list actors, major writers, those are the rich/upper class.

A person making six digits is by no means rich. I’d put $200,000 a year as middle class.

If you include $35,000 as middle class, even someone working overtime at McDonald’s is Middle Class.

Alon Levy January 22, 2010 - 1:45 am

Yes, if you make $35,000, which is a lower middle class income, then you can’t live in the most expensive neighborhoods. You also can’t afford the most expensive restaurants. So what? You can afford a nice one bedroom in Washington Heights, and you can afford decent supermarket food.

To put things in perspective for you, $200,000 a year is above-median in the richest parts of Manhattan, and about 97th percentile nationwide. That’s not middle class.

petey January 20, 2010 - 9:11 am

“Somehow we find ourselves compensating a member of the blue collar commuter rail workforce $120,000 per year.”

somehow i’m uncomfortable with that tag ‘blue collar.’ is there some morally inherent reason why ‘blue collar’ work should be devalued?

AK January 20, 2010 - 9:24 am

‘Blue Collar’ work generally is “less skilled” manual labor. Now many people (especially in modern America) want nothing to do with the hard work of manual labor (and that leads to higher wages for manual laborers–> the best examples of this is with window washers and septic system operators (both jobs do not require high skill, but both pay fairly well because most peopel are unwilling to perform them because of fear, social stigma, etc).

When people say ‘blue collar,’ they generally aren’t talking about well-educated engineers/architects/etc. who work with hard-hats, they are talking about the workers who actually dig tunnels, set up lighting, etc (ala Irish immigrants in NYC 130 years ago).

But let’s connect this with Ray’s point above. The question is how much the blue collar worker should make. I would argue that when blue collar transit employees make more than law school graduates (and even some meduical school graduates!), we have a real flaw in the marketplace– indeed, it indicates either (a) that people grossly overvalue higher education or (b) TWU workers are paid WAY above market value for their services. I think (b) is unquestionably true, but (a) likely has some merit as well.

Let’s assume for the moment that (b) is true. Is an above-market wage for a working man necessarily a social wrong? As a supporter of collective bargaining, I would say no, especially in an age where white-collar workers collect massive payouts for shoddy work. The question thus becomes, at what point does the pay-scale deviate so much from what the market would bear that it becomes unjust to the rest of society (particularly with public employees, whose salaries are paid from the salaries of the people)?

I would say that paying a train operator $100,000 probably crosses the line– we could do some fairly simple polling to find out what the public thought.

I sympathize with Ray’s desire to raise taxes on the wealthy. But if we’re going to do that, I want the revenue to be put to the most efficient/socially productive use, which is, I posit, not to give TWU workers raises from 95K to 105K, but instead, to maintain/expand transit options for the majority of New Yorkers who make FAR less money and depend on the system on a daily basis.

Boris January 20, 2010 - 11:06 am

“Is an above-market wage for a working man necessarily a social wrong?”

An above-market wage for one person, by basic economics, guarantees that another person must accept a below-market wage (or go unemployed). I think that is a social wrong in most cases. Minimum wage laws increase unemployment, especially among the poorest populations, and so do unions.

A union, especially a government union, no longer fulfills its main function- better working conditions- because the relationship between the government and the workers is no longer adversarial. A union is now just a club. If you are a member, you get above-market wages; if you are not, you get below-market wages.

I agree with your other points though. Our main concern is to figure out how higher taxes (or more efficient spending) goes toward service improvements, not fatter paychecks.

petey January 20, 2010 - 11:18 am

your lecture is misplaced AK, my father was a blue collar irish immigrant. what we’re dealing with here at root is a moral calculus for pay, which is fundamentally anti-market. if that’s your position fine, just say so, but don’t try to wrap it in argumentation such as:

“The question is how much the blue collar worker should make.” who is to make this decision? the market has already done so.

“TWU workers are paid WAY above market value for their services.” no, they’re paid obviously what the market gave them.

“at what point does the pay-scale deviate so much from what the market would bear…” but we know what the market bears, because it’s been decided. also, the market comparison isn’t between a doctor and a bus driver, it’s between a doctor and a doctor or a bus driver and a bus driver.

AK January 20, 2010 - 11:54 am

Pete, I obivously didn’t explain the foundation of my position, and I certainly did not intend to “lecture”. Let me try again. I disagree with your view that the “market” has set the wages of TWU employees.

I think unions (collective bargaining in general) produce market distortions. It seems beyond reproach that, in the absence of union organizing, wages would be lower. Now you may not think that the wage earned by a non-union employee is the “market” wage– in fact, many supporters of unionization claim that unions “level the playing field” by creating better information sharing in the market for employment (in other words, the employer can’t low-ball individuals off one another because unions create efficient/instant information distribution).

Now, putting that debate to the side for a moment, I think it is clear that thousands of people would sign up for the chance at most public employment in NYC, TWU jobs included, partially because the salaries/benefits of those jobs, when compared with non-union jobs, are enormous. As a citizen, I think there is a moral problem in taxing the public to pay above-market wages (whether it is TWU workers, police officers, teachers, or otherwise). Moreover, I think is is reasonable (though NOT morally required) to expect the market to reward rare ability. Indeed, this is what the scarcity principle would indicate. At the extreme, we have rare atheltic talent, which is obviously compensated quite well. In the middle, we have skills earned from study at professional schools (law, medicine, etc), which traditionally pay better than “non-skilled” jobs.

That makes charts like this one, unsuprising:


So again, let me reiterate that I am not a free market absolutist by ANY means. I do not believe that what = market = moral. I simply think the “market” value of something provides a point of reference to discuss how much a particular thing is/should be valued in a democratic republic such as ours.

Lastly, can we all agree that we don’t need “credentials” to make arguments in this space? My parents are retired public school teachers and my father was the head of his teachers’ union. But that background makes me no less/more qualified to discuss issues in this forum.

And to Boris– I’m willing to accept the view of most economists that min. wage laws (another factor that distorts market wages) increase unemployment, especially among the poorest populations. The question is whether the absence of minimum wage laws would be better for working class Americans in the long run. Worth a debate– but not here 🙂

AK January 20, 2010 - 11:57 am

Whoops, one correction: when I wrote, “As a citizen, I think there is a moral problem in taxing the public to pay above-market wages,” I meant:

“As a citizen, I think when the State taxes the public to pay above-market wages, we, as taxpayers, should have a frank discussion regarding whether such an arrangement properly reflects our values.”

That’s better 🙂

Christmas James January 20, 2010 - 10:41 am

That’s total BS. The average white collar worker at LIRR or NYCT doesn’t make anywhere close to what she sites in this article. It’s just completely factually wrong. White collar workers at MTA and it’s agencies are under-paid relative to the private sector, whereas blue collar workers are over-paid relative to the private sector.

Working Class January 20, 2010 - 12:38 pm

A train operator, locomotive engineer, track worker, conductor for example can you tell me what jobs are there private sector counterparts? These are specialized jobs. Just look when the MTA puts out job posting for office type jobs they pay way more than they should and include lots of perks.

Alon Levy January 20, 2010 - 3:11 pm

When you say private sector, do you mean the 3-4 transit operators worldwide that are privately owned? I’m pretty sure wages at NYCT are higher at all levels than at the Singapore and Hong Kong subway operators, yes – possibly even for the top managers.

Christmas James January 20, 2010 - 1:15 pm

Well Amtrak has these same jobs and they’re a private company and they pay much less.

Go to the MTA website and give me an example of an office job that pays way more then they should? I agree that some of the executives receive some strange perks but they are an extremely small minority (less then 2% I’d guess) of the white-collar workforce.

Working Class January 20, 2010 - 1:48 pm

Amtrak locomotive engineers make more than a train operator for NYCT and there conductors make more also.

Eric F. January 20, 2010 - 1:19 pm

What really bothers me, and the few other people who are aware of it, are the extremely high, utterly secure pension benefits provided tp workers so early in their productive lives. My father is 64. He’s at work today, in part to pay taxes to fund the retirement of people 10 years or more his junior. What is liberal or progressive about that state of affairs? Why must a UPS truck driver toil into his 60s to pay the pension benefits of an MTA bus driver who can retire to Florida years before that? And spare me the idea that “all” workers should have a 30-year paid-for retirement. No country could function with people simply taking benefit checks for three decades or more after working two decades. The pension benefits that union members get is simply an expression of raw political power. There is nothing just or progressive about it.

Alon Levy January 20, 2010 - 10:10 pm

Eric, I actually find it surprising that your father is not unionized. I thought truck drivers were one of the most unionized industries in the US, with one of the most militant unions. (In fact, much of the anti-union legislation in the US, e.g. the ban on secondary strikes, was passed to prevent the Teamsters from abusing their power.)

At any rate: unions were formed so that your father would be able to work 40 hours a week instead of 80, and retire at 65. In Hong Kong and Singapore, arguably the only two really capitalist countries in the world, neither is guaranteed. Singapore has a lush social security system, but it’s entirely defined-contribution, without any redistribution: if your benefits run out when you’re 70, you have to go back into the workforce. There are a lot of advantages to living in a capitalist country, rather than in a lobbyist-run country, but there are also disadvantages.

The question of what unions do now is different… but a lot of the privileges given to the most powerful unions stem from an unholy alliance made between the major unions and the major employers after WW2, in which the unions would give up on fighting for the entire working class and instead get benefits for just their own members. The more militant unions, e.g. the TWU before it joined the AFL, were opposed to this, but the employers believed that their ideas about social security and health care for all were socialistic.

Niccolo Machivelli January 20, 2010 - 1:56 pm

Well, thanks again for giving Ms. Gelinas one more sounding board to lecture organized workers on how good they have it. You guys should run for union office really. And a good finger wagging from a college student with a computer always helps negotiate an agreement. If you want market wages get in a taxi cab, dollar van or gypsy cab, the Manhattan Institute loves that arrangement. If you want those labor standards for the TA go to Albany and get some legislation, you’ll need a lot and don’t expect organized workers to roll over for you.

“Gelinas’ basic point is a sound one. From top to bottom, from management to track workers, from blue collar to white, the MTA’s compensation scales are crippling the organization.” This is complete and total hogwash. When was the last time you hired an electrician to do some wiring in your house? What were that guys wages? There are some great jobs on the MTA and some great employees but for the most part these wage scales are in no way out of line with the “market” unless you entirely discount collective bargaining, which for some reason you seem reluctant to do when you say “workers’ right shouldn’t be eroded as is.”

I don’t mind a good anti-labor scribe, I enjoy it in fact, but your tendency to want to have it both ways on this blog is irking, especially when you use your pulpit for Ms. Gelinas’ think tank/dying tabloid diatribes. What market sets the wages at the Manhattan Institute?

David Robertson January 21, 2010 - 12:42 pm


The republican Manhattan Institute began 1981 – Ms. Gelinas writes in republican tabloids, her favorites Bill Oreilly, Glenn Beck and Rush Limbaugh who love to harangue negatives with racial undertones they favor Baroness of Wasilla Sarah Palin {Henry Loeb} policies.

Long hours and no overtime, no grievance procedure, no paid vacation, no sick leave, injured on duty – you get fired, faulty equipment, no workmen compensation, rely on handouts and lord will hold your hand – Baroness of Wasilla and her choir what really irks them is minorities now get the protection of law – thus this ‘sound point’.

Duke87 January 20, 2010 - 2:01 pm

Union workers are overpaid. It’s just a law of nature. The fact that a train conductor ($120k typical, union) makes more than a professional engineer ($80k typical, non-union) working for Metro-North speaks volumes to that.

At what point to we admit that these “working class” people who are supposedly oppressed by the wealthy are, themselves, actually fairly wealthy considering the work they do?
Talk about becoming that which you hate…

Eric F. January 20, 2010 - 2:05 pm

Further to my post above, I’m losing my dental hygienist soon. She and her husband will be decamping to Florida when he becomes eligible for his pension in about 2 years. He’s a NYC cop (this is not an MTA anecdote per se). His age? Wait for it. He’s 39. Oh and while I’m sure his job requires a lot of skill, and while I’m sure he has had to deal with his share of danger over the years, he currently works in the Jamaica crime lab, which I don’t understand to be any more dangerous than any other lab. Anyway, enjoy paying your taxes, suckers.


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